What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2020-10-22 · 169 added, 302 removed, 297 unchanged (61% of the section changed)

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

(Thousands, except per share amounts)

11 unchanged sentences

Amortization of intangible assets — 7,478

Loss on sale/exchange of long-lived assets 4,662 13,935 102,721 13,935

Impairment of intangible assets — 15,411 — 15,411

(Gain) loss on sale/exchange of long-lived assets ( 1,207 ) 48,852

Impairment and expiration of leases 16,757 53,768

Transaction, proxy and reorganization 1,855 76,779 6,600 102,386

Other operating expenses 9,443 —

Total operating expenses 941,078 983,699

Operating (loss) income ( 760,195 ) ( 161,529 ) ( 1,023,749 ) 309,957

Operating income 8,845 123,358

Gain on Equitrans Share Exchange (see Note 8)

(Gain) loss on investment in Equitrans Midstream Corporation ( 3,801 ) 261,093 303,844 276,779

— ( 187,223 )

(Income) loss from investments ( 11,848 ) 390,628

Dividend and other income ( 3,304 ) ( 24,714 )

2 unchanged sentences

Loss before income taxes ( 55,526 ) ( 134,317 )

Income tax benefit ( 225,757 ) ( 86,343 ) ( 295,938 ) ( 9,244 )

Income tax (benefit) expense ( 14,494 ) 32,822

Net loss ( 41,032 ) ( 167,139 )

Loss per share of common stock:

Net loss attributable to noncontrolling interest ( 514 ) —

Net loss attributable to EQT Corporation $ ( 40,518 ) $ ( 167,139 )

Loss per share of common stock attributable to EQT Corporation:

Weighted average common stock outstanding 278,852 255,435

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net loss $ ( 41,032 ) $ ( 167,139 )

Other comprehensive income (loss), net of tax:

Net change in interest rate cash flow hedges (a) — 43 — 127

Other post-retirement benefits liability adjustment (b) 72 77 156 229

Change in accounting principle (c) — — — ( 496 )

Other comprehensive income (loss) 72 120 156 ( 140 )

Other comprehensive income, net of tax:

Other post-retirement benefits liability adjustment, net of tax expense:

$ 27 and $ 24

Comprehensive loss ( 40,952 ) ( 167,127 )

(a) Net of tax expense of $ 10 and $ 30 for the three and nine months ended September 30, 2019.

(b) Net of tax expense of $ 23 and $ 26 for the three months ended September 30, 2020 and 2019, respectively, and $ 71 and $ 78 for the nine months ended September 30, 2020 and 2019, respectively.

Comprehensive loss attributable to noncontrolling interests ( 514 ) —

Comprehensive loss attributable to EQT Corporation $ ( 40,438 ) $ ( 167,127 )

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

EQT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

March 31, 2021 December 31, 2020

Current assets:

Cash and cash equivalents $ 40,670 $ 18,210

Accounts receivable (less provision for doubtful accounts:

$ 7,049 and $ 6,239 )

682,496 566,552

Derivative instruments, at fair value 431,949 527,073

Prepaid expenses and other 158,590 103,615

Total current assets 1,313,705 1,215,450

Property, plant and equipment 22,168,856 21,995,249

Accumulated depreciation and depletion 6,270,840 5,940,984

Net property, plant and equipment 15,898,016 16,054,265

Contract asset 390,005 410,000

Other assets 437,678 433,754

Total assets $ 18,039,404 $ 18,113,469

LIABILITIES AND EQUITY

Current liabilities:

Current portion of debt $ 29,291 $ 154,161

Accounts payable 812,273 705,461

Derivative instruments, at fair value 651,058 600,877

Other current liabilities 257,405 301,911

Total current liabilities 1,750,027 1,762,410

Credit facility borrowings 300,000 300,000

Senior notes 4,378,270 4,371,467

Note payable to EQM Midstream Partners, LP 98,487 99,838

Deferred income taxes 1,358,489 1,371,967

Other liabilities and credits 923,765 945,057

Total liabilities 8,809,038 8,850,739

Common stock, no par value, shares authorized:

640,000 , shares issued:

8,238,643 8,241,684

Treasury stock, shares at cost:

1,222 and 1,658

( 21,469 ) ( 29,348 )

Retained earnings 1,007,741 1,048,259

Accumulated other comprehensive loss ( 5,275 ) ( 5,355 )

Total common shareholders' equity 9,219,640 9,255,240

Noncontrolling interests in consolidated subsidiaries 10,726 7,490

Total equity 9,230,366 9,262,730

Total liabilities and equity $ 18,039,404 $ 18,113,469

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

EQT CORPORATION AND SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS (UNAUDITED)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

1 unchanged sentence

Adjustments to reconcile net loss to net cash provided by operating activities:

Deferred income tax benefit ( 182,244 ) ( 10,407 )

Deferred income tax (benefit) expense ( 13,505 ) 127,860

Depreciation and depletion 377,116 357,526

Amortization of intangible assets — 7,478

Impairment of leases and intangible assets and loss on sale/exchange of long-lived assets 248,217 157,065

Loss on sale/exchange of long-lived assets and impairment and expiration of leases 15,550 102,620

Gain on Equitrans Share Exchange — ( 187,223 )

Loss on investment in Equitrans Midstream Corporation 303,844 276,779

(Income) loss from investments ( 11,848 ) 390,628

Loss on debt extinguishment 4,424 16,610

2 unchanged sentences

Loss (gain) on derivatives not designated as hedges 188,813 ( 389,436 )

Cash settlements received on derivatives not designated as hedges 813,218 152,149

Net premiums (paid) received on derivative instruments ( 53,473 ) 22,512

Cash settlements (paid) received on derivatives not designated as hedges ( 38,140 ) 245,736

Net premiums (paid) on derivative instruments ( 3,147 ) —

Changes in other assets and liabilities:

1 unchanged sentence

Accounts payable 116,732 ( 85,840 )

Tax receivable 248,101 3,784

Income tax receivable and payable ( 23,909 ) ( 92,809 )

Other items, net ( 75,447 ) 17,207

2 unchanged sentences

Capital expenditures ( 251,277 ) ( 256,156 )

Proceeds from sale of assets 113,236 —

Cash received for Equitrans Share Exchange — 52,323

2 unchanged sentences

Cash flows from financing activities:

Proceeds from borrowings on credit facility 1,772,750 2,261,250

Repayment of borrowings on credit facility ( 1,822,250 ) ( 2,900,250 )

Proceeds from credit facility borrowings 1,581,000 206,000

Repayment of credit facility borrowings ( 1,581,000 ) ( 500,000 )

Proceeds from issuance of debt — 1,750,000

Debt issuance costs and Capped Call Transactions (See Note 6) ( 65,102 ) ( 913 )

Debt issuance costs — ( 15,662 )

Repayments and retirements of debt ( 126,396 ) ( 1,701,224 )

Premiums paid on debt extinguishment ( 4,267 ) ( 13,660 )

Contributions from noncontrolling interests 3,750 —

Dividends paid — ( 7,664 )

13 unchanged sentences

EQT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

September 30, 2020 December 31, 2019

Current assets:

Cash and cash equivalents $ 13,668 $ 4,596

Accounts receivable (less provision for doubtful accounts:

$ 3,897 and $ 6,861 )

428,439 610,088

Derivative instruments, at fair value 503,648 812,664

Tax receivable 50,753 298,854

Prepaid expenses and other 345,646 28,653

Total current assets 1,342,154 1,754,855

Property, plant and equipment 21,134,536 21,655,351

Accumulated depreciation and depletion 5,577,119 5,499,861

Net property, plant and equipment 15,557,417 16,155,490

Net intangible assets 3,573 26,006

Contract asset 325,934 —

Investment in Equitrans Midstream Corporation 214,004 676,009

Other assets 131,653 196,867

Total assets $ 17,574,735 $ 18,809,227

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of debt $ 33,363 $ 16,204

Accounts payable 693,141 796,438

Derivative instruments, at fair value 894,618 312,696

Other current liabilities 218,395 220,564

Total current liabilities 1,839,517 1,345,902

Credit facility borrowings 244,500 294,000

Term loan facility borrowings — 999,353

Senior notes 4,351,917 3,878,366

Note payable to EQM Midstream Partners, LP 101,170 105,056

Deferred income taxes 1,336,629 1,485,814

Other liabilities and credits 855,193 897,148

Total liabilities 8,728,926 9,005,639

Shareholders' equity:

Common stock, no par value, shares authorized:

640,000 and 320,000 , shares issued:

257,003 and 257,003

7,895,628 7,818,205

Treasury stock, shares at cost:

1,658 and 1,832

( 29,347 ) ( 32,507 )

Retained earnings 984,571 2,023,089

Accumulated other comprehensive loss ( 5,043 ) ( 5,199 )

Total shareholders' equity 8,845,809 9,803,588

Total liabilities and shareholders' equity $ 17,574,735 $ 18,809,227

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

EQT CORPORATION AND SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED EQUITY (UNAUDITED)

Common Stock Accumulated Other

Comprehensive Loss

Shares No Par Value Treasury Stock Retained Earnings Total Equity

Comprehensive Loss (a) Noncontrolling Interests in Consolidated Subsidiaries

Shares No Par

Value Treasury Stock Retained Earnings Total Equity

(Thousands, except per share amounts)

Balance at July 1, 2019 254,796 $ 7,807,740 $ ( 39,310 ) $ 3,485,711 $ ( 5,666 ) $ 11,248,475

Comprehensive income, net of tax:

Net income ( 361,028 ) ( 361,028 )

Net change in interest rate cash flow hedges, net of tax expense:

Other postretirement benefits liability adjustment, net of tax expense:

Dividends ($ 0.03 per share)

( 7,668 ) ( 7,668 )

Share-based compensation plans 374 10,943 6,783 17,726

Balance at September 30, 2019 255,170 $ 7,818,683 $ ( 32,527 ) $ 3,117,015 $ ( 5,546 ) $ 10,897,625

Balance at July 1, 2020 255,290 $ 7,889,072 $ ( 30,341 ) $ 1,585,211 $ ( 5,115 ) $ 9,438,827

Balance at January 1, 2020 255,171 $ 7,818,205 $ ( 32,507 ) $ 2,023,089 $ ( 5,199 ) $ — $ 9,803,588

Comprehensive loss, net of tax:

1 unchanged sentence

Other postretirement benefits liability adjustment, net of tax expense:

Share-based compensation plans 55 6,556 994 7,550

Balance at September 30, 2020 255,345 $ 7,895,628 $ ( 29,347 ) $ 984,571 $ ( 5,043 ) $ 8,845,809

Common shares authorized:

320,000 and 640,000 at September 30, 2019 and 2020, respectively.

Preferred shares authorized:

There were no preferred shares issued or outstanding.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

EQT CORPORATION AND SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED EQUITY (UNAUDITED)

Common Stock Accumulated Other

Comprehensive Loss

Shares No Par Value Treasury Stock Retained Earnings Total Equity

(Thousands, except per share amounts)

Balance at January 1, 2019 254,472 $ 7,828,554 $ ( 49,194 ) $ 3,184,275 $ ( 5,406 ) $ 10,958,229

Comprehensive income, net of tax:

Net income ( 44,771 ) ( 44,771 )

Net change in interest rate cash flow hedges, net of tax expense:

Other postretirement benefits liability adjustment, net of tax expense:

Dividends ($ 0.03 per share)

1 unchanged sentence

Share-based compensation plans 91 3,426 1,655 5,081

Change in accounting principle (a) 496 ( 496 ) —

Other ( 222 ) ( 14,470 ) ( 14,470 )

Balance at September 30, 2019 255,170 $ 7,818,683 $ ( 32,527 ) $ 3,117,015 $ ( 5,546 ) $ 10,897,625

Balance at March 31, 2020 255,262 $ 7,821,631 $ ( 30,852 ) $ 1,848,286 $ ( 5,187 ) $ — $ 9,633,878

Balance at January 1, 2021 278,345 $ 8,241,684 $ ( 29,348 ) $ 1,048,259 $ ( 5,355 ) $ 7,490 $ 9,262,730

2 unchanged sentences

Other postretirement benefits liability adjustment, net of tax expense:

Dividends ($ 0.03 per share)

( 7,664 ) ( 7,664 )

Share-based compensation plans 436 ( 3,041 ) 7,879 4,838

Equity component of convertible senior notes (See Note 6) 63,645 63,645

Balance at September 30, 2020 255,345 $ 7,895,628 $ ( 29,347 ) $ 984,571 $ ( 5,043 ) $ 8,845,809

Contributions from noncontrolling interests 3,750 3,750

Balance at March 31, 2021 278,781 $ 8,238,643 $ ( 21,469 ) $ 1,007,741 $ ( 5,275 ) $ 10,726 $ 9,230,366

Common shares authorized:

320,000 and 640,000 at September 30, 2019 and 2020, respectively.

320,000 and 640,000 at March 31, 2020 and 2021, respectively.

Preferred shares authorized:

There were no preferred shares issued or outstanding.

(a) Related to adoption of ASU 2018-02 .

(a) Amounts included in accumulated other comprehensive loss are related to other postretirement benefits liability adjustments, net of tax.

Losses (gains), net of tax, are attributable to net actuarial losses and net prior service costs.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4 unchanged sentences

Accordingly, they do not include all information and notes required by GAAP for complete financial statements.

In the opinion of management, these statements include all adjustments (consisting of only normal recurring accruals, unless otherwise disclosed in this Quarterly Report on Form 10-Q) necessary for a fair presentation of the financial position of EQT Corporation and subsidiaries as of September 30, 2020 and December 31, 2019, the results of its operations and equity for the three and nine month periods ended September 30, 2020 and 2019 and its cash flows for the nine month periods ended September 30, 2020 and 2019.

In the opinion of management, these statements include all adjustments (consisting of only normal recurring accruals, unless otherwise disclosed in this Quarterly Report on Form 10-Q) necessary for a fair presentation of the financial position of EQT Corporation and subsidiaries as of March 31, 2021 and December 31, 2020, and the results of its operations, cash flows and equity for the three month periods ended March 31, 2021 and 2020.

Certain previously reported amounts have been reclassified to conform to the current year presentation.

3 unchanged sentences

Recently Issued Accounting Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, Financial Instruments – Credit Losses:

Measurement of Credit Losses on Financial Instruments .

This ASU amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities.

For assets held at amortized cost basis, this ASU eliminates the probable initial recognition threshold and requires entities to reflect their current estimate of all expected credit losses.

The amendment affects loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables and any other financial assets not excluded from its scope that have a contractual right to receive cash.

This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company adopted this ASU on January 1, 2020 with no changes to its methodology, financial statements or disclosures.

In July 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting .

This ASU expands the scope of Topic 718, Compensation – Share Compensation, to include share-based payment transactions where a grantor acquires goods or services from a nonemployee.

This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted.

The Company adopted this ASU on January 1, 2020 with no changes to its methodology, financial statements or disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement, Changes to the Disclosure Requirements for Fair Value Measurement .

This ASU modifies the hierarchy associated with Level 1, 2 and 3 fair value measurements and the related disclosure requirements.

This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted.

The Company adopted this ASU on January 1, 2020 with no changes to its methodology, financial statements or disclosures.

In August 2018, the FASB issued ASU 2018-15 , Intangibles – Goodwill and Other – Internal-Use Software:

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract .

This ASU provides guidance on accounting for implementation costs incurred by a customer in a cloud computing arrangement that is a service contract.

This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted.

The Company adopted this ASU prospectively on January 1, 2020, at which point onward applicable costs were capitalized to the Condensed Consolidated Balance Sheet rather than expensed to selling, general and administrative expense in the Statement of Condensed Consolidated Operations.

For the three and nine months ended September 30, 2020, such capitalized costs were approximately $ 2 million and $ 6 million, respectively.

In December 2019, the FASB issued ASU 2019-12, Income Taxes:

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes:

Simplifying the Accounting for Income Taxes .

1 unchanged sentence

In addition, this ASU simplifies aspects of accounting for franchise taxes and interim period effects of enacted changes in tax laws or rates and provides clarification on accounting for transactions that result in a step up in the tax basis of goodwill and allocation of consolidated income tax expense to separate financial statements of entities not subject to income tax.

This ASU is effective for fiscal years beginning after December 15, 2020, including interim

EQT Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

periods within those fiscal years, and early adoption is permitted.

The Company is evaluating the impact this standard will have on its financial statements and related disclosures.

This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and early adoption is permitted.

The Company adopted this ASU in the first quarter of 2021 with no material impact on its financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options and Derivatives and Hedging:

5 unchanged sentences

This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Adoption beginning after December 15, 2020, including interim periods within those fiscal years, is permitted.

The Company has not determined the timing or method of adoption and is evaluating the impact this standard will have on its financial statements and related disclosures.

The Company plans to adopt this ASU on January 1, 2022 using the full retrospective method of adoption.

The Company is evaluating the impact this standard will have on its financial statements and related disclosures.

Revenue from Contracts with Customers

6 unchanged sentences

For these contracts, the Company generally concludes that the fixed price or fixed differentials in the contracts are representative of the standalone selling price.

Based on management's judgment, the performance obligations for the sale of natural gas, NGLs and oil are satisfied at a point in time because the customer obtains control and legal title of the asset when the natural gas, NGLs or oil is delivered to the designated sales point.

The sales of natural gas, NGLs and oil presented in the Statements of Condensed Consolidated Operations represent the Company's share of revenues net of royalties and excluding revenue interests owned by others.

When selling natural gas, NGLs and oil on behalf of royalty or working interest owners, the Company is acting as an agent and, thus, reports the revenue on a net basis.

For contracts with customers where the Company's performance obligations had been satisfied and an unconditional right to consideration existed as of the balance sheet date, the Company recorded amounts due from contracts with customers of $ 275.8 million and $ 384.0 million in accounts receivable in the Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019, respectively.

EQT CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The sales of natural gas, NGLs and oil presented in the Statements of Condensed Consolidated Operations represent the Company's share of revenues net of royalties and exclude revenue interests owned by others.

When selling natural gas, NGLs and oil on behalf of royalty or working interest owners, the Company acts as an agent and, thus, reports the revenue on a net basis.

For contracts with customers where the Company's performance obligations had been satisfied and an unconditional right to consideration existed as of the balance sheet date, the Company recorded amounts due from contracts with customers of $ 467.8 million and $ 394.1 million in accounts receivable in the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020, respectively.

The table below provides disaggregated information on the Company's revenues.

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Revenues from contracts with customers:

7 unchanged sentences

Total operating revenues $ 949,923 $ 1,107,057

The following table summarizes the transaction price allocated to the Company's remaining performance obligations on all contracts with fixed consideration as of September 30, 2020.

Amounts shown exclude contracts that qualified for the exception to the relative standalone selling price method as of September 30, 2020.

The following table summarizes the transaction price allocated to the Company's remaining performance obligations on all contracts with fixed consideration as of March 31, 2021.

Amounts shown exclude contracts that qualified for the exception to the relative standalone selling price method as of March 31, 2021.

2021 (a) 2022 2023 Total

Natural gas sales $ 133,576 $ 8,158 $ 6,794 $ 148,528

(a) October 1 through December 31.

(a) April 1 through December 31.

Derivative Instruments

6 unchanged sentences

The Company may also use other contractual agreements when executing its commodity hedging strategy.

The Company typically enters into over the counter (OTC) derivative commodity instruments with financial institutions, and the creditworthiness of all counterparties is regularly monitored.

The Company typically enters into over the counter

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(OTC) derivative commodity instruments with financial institutions, and the creditworthiness of all counterparties is regularly monitored.

The Company does not designate any of its derivative instruments as cash flow hedges;

5 unchanged sentences

Contracts that result in the physical receipt or delivery of a commodity but are not designated or do not meet all of the criteria to qualify for the normal purchase and normal sale scope exception are subject to derivative accounting.

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The Company's OTC derivative instruments generally require settlement in cash.

1 unchanged sentence

Settlements of derivative commodity instruments are reported as a component of cash flows from operating activities in the Statements of Condensed Consolidated Cash Flows.

With respect to the derivative commodity instruments held by the Company, the Company hedged portions of expected sales of production and portions of its basis exposure covering approximately 1,659 Bcf of natural gas and 1,723 Mbbl of NGLs as of September 30, 2020 and 1,644 Bcf of natural gas as of December 31, 2019.

The open positions at both September 30, 2020 and December 31, 2019 had maturities extending through December 2024.

With respect to the derivative commodity instruments held by the Company, the Company hedged portions of expected sales of production and portions of its basis exposure covering approximately 1,954 Bcf of natural gas and 9,984 Mbbl of NGLs as of March 31, 2021 and 1,955 Bcf of natural gas and 3,462 Mbbl of NGLs as of December 31, 2020.

The open positions at both March 31, 2021 and December 31, 2020 had maturities extending through December 2024.

Certain of the Company's OTC derivative instrument contracts provide that, if the Company's credit rating assigned by Moody's Investors Service, Inc.

5 unchanged sentences

Anything below these ratings is considered non-investment grade.

As of September 30, 2020, the Company's senior notes were rated "Ba3" by Moody's and "BB–" by S&P.

As of March 31, 2021, the Company's senior notes were rated "Ba2" by Moody's and "BB" by S&P.

When the net fair value of any of the Company's OTC derivative instrument contracts represents a liability to the Company that is in excess of the agreed-upon dollar threshold for the Company's then-applicable credit rating, the counterparty has the right to require the Company to remit funds as a margin deposit in an amount equal to the portion of the derivative liability that is in excess of the dollar threshold amount.

The Company records these deposits as a current asset in the Condensed Consolidated Balance Sheets.

As of September 30, 2020, the aggregate fair value of all OTC derivative instruments with credit rating risk-related contingent features that were in a net liability position was $ 228.8 million, for which the Company deposited and recorded as a current asset $ 142.0 million.

As of December 31, 2019, there were no such deposits recorded in the Condensed Consolidated Balance Sheet.

As of March 31, 2021 and December 31, 2020, the aggregate fair value of all OTC derivative instruments with credit rating risk-related contingent features that were in a net liability position was $ 176.6 million and $ 137.7 million, respectively, for which the Company deposited and recorded current assets of zero and $ 21.1 million, respectively.

When the net fair value of any of the Company's OTC derivative instrument contracts represents an asset to the Company that is in excess of the agreed-upon dollar threshold for the counterparty's then-applicable credit rating, the Company has the right to require the counterparty to remit funds as a margin deposit in an amount equal to the portion of the derivative asset that is in excess of the dollar threshold amount.

The Company records these deposits as a current liability in the Condensed Consolidated Balance Sheets.

As of September 30, 2020 and December 31, 2019, there were no such deposits recorded in the Condensed Consolidated Balance Sheets.

As of March 31, 2021 and December 31, 2020, there were no such deposits recorded in the Condensed Consolidated Balance Sheets.

When the Company enters into exchange traded natural gas contracts, exchanges may require the Company to remit funds to the corresponding broker as good-faith deposits to guard against the risks associated with changing market conditions.

3 unchanged sentences

The Company records these deposits as a current liability in the Condensed Consolidated Balance Sheets.

The initial margin requirements are established by the exchanges based on the price, volatility and the time to expiration of the contract.

The margin requirements are subject to change at the exchanges' discretion.

As of September 30, 2020 and December 31, 2019, the Company recorded $ 102.5 million and $ 12.6 million, respectively, of such deposits as a current asset in the Condensed Consolidated Balance Sheets.

Refer to Note 9 for a discussion of the derivative liability recorded in connection with the Equitrans Share Exchange (defined in Note 9).

The initial margin

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

requirements are established by the exchanges based on the price, volatility and the time to expiration of the contract.

The margin requirements are subject to change at the exchanges' discretion.

As of March 31, 2021 and December 31, 2020, the Company recorded $ 111.7 million and $ 61.5 million, respectively, of such deposits as current assets in the Condensed Consolidated Balance Sheets.

Refer to Note 8 for a discussion of the derivative liability recorded in connection with the Equitrans Share Exchange (defined in Note 8).

The Company has netting agreements with financial institutions and its brokers that permit net settlement of gross commodity derivative assets against gross commodity derivative liabilities.

2 unchanged sentences

master netting agreements Margin requirements with counterparties Net derivative instruments

September 30, 2020

March 31, 2021

Asset derivative instruments, at fair value $ 431,949 $ ( 340,292 ) $ — $ 91,657

3 unchanged sentences

Liability derivative instruments, at fair value 600,877 ( 328,809 ) ( 82,552 ) 189,516

The Company has not executed any interest rate swaps since 2011.

As of December 31, 2019, amounts related to historical interest rate swaps that had been previously recorded in accumulated other comprehensive income (OCI) were fully reclassified into interest expense.

Fair Value Measurements

1 unchanged sentence

The Company estimates the fair value of its financial instruments using quoted market prices when available.

If quoted market prices are not available, fair value is based on models that use market-based parameters, including forward curves, discount rates, volatilities and nonperformance risk, as inputs.

If quoted market prices are not available, the fair value is based on models that use market-based parameters, including forward curves, discount rates, volatilities and nonperformance risk, as inputs.

Nonperformance risk considers the effect of the Company's credit standing on the fair value of liabilities and the effect of the counterparty's credit standing on the fair value of assets.

15 unchanged sentences

(Level 2) Significant unobservable inputs

September 30, 2020

March 31, 2021

Asset derivative instruments, at fair value $ 431,949 $ 65,167 $ 366,782 $ —

7 unchanged sentences

The carrying value of the Company's investment in Equitrans Midstream Corporation (Equitrans Midstream) approximates fair value as Equitrans Midstream is a publicly traded company.

The carrying values of borrowings on the Company's credit facility and term loan facility (which was fully repaid in the second quarter of 2020) approximate fair value as the interest rates are based on prevailing market rates.

The carrying value of borrowings under the Company's credit facility approximates fair value as the interest rate is based on prevailing market rates.

The Company considered all of these fair values to be Level 1 fair value measurements.

The Company has an immaterial investment in a fund that invests in companies developing technology and operating solutions for exploration and production companies.

The investment is valued using, as a practical expedient, the net asset value provided in the financial statements received from fund managers and is recorded in other assets in the Condensed Consolidated Balance Sheets.

The Company estimates the fair value of its senior notes using established fair value methodology.

Because not all of the Company's senior notes are actively traded, their fair value is a Level 2 fair value measurement.

As of September 30, 2020 and December 31, 2019, the Company's senior notes had a fair value of approximately $ 4.8 billion and $ 3.9 billion, respectively, and a carrying value of approximately $ 4.4 billion and $ 3.9 billion, respectively, inclusive of any current portion.

As of March 31, 2021 and December 31, 2020, the Company's senior notes had a fair value of approximately $ 5.2 billion and a carrying value of approximately $ 4.4 billion and $ 4.5 billion, respectively, inclusive of any current portion.

The fair value of the Company's note payable to EQM Midstream Partners, LP (EQM) is estimated using an income approach model with a market-based discount rate and is a Level 3 fair value measurement.

As of September 30, 2020 and December 31, 2019, the Company's note payable to EQM had a fair value of approximately $ 131 million and $ 128 million, respectively, and a carrying value of approximately $ 106 million and $ 110 million, respectively, inclusive of any current portion.

As of March 31, 2021 and December 31, 2020, the Company's note payable to EQM had a fair value of approximately $ 122 million and $ 130 million, respectively, and a carrying value of approximately $ 104 million and $ 105 million, respectively, inclusive of any current portion.

See Note 6 for further discussion of the Company's debt.

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See Note 1 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of the fair value of assets related to the impairment and expiration of leases.

For the nine months ended September 30, 2020, the Company calculated the provision for income taxes for interim periods by applying an estimate of the annual effective tax rate for the full fiscal year to "ordinary" income or loss (pre-tax income or loss excluding unusual or infrequently occurring items) for the period.

For the nine months ended September 30, 2019, the Company determined that this method of applying an estimate of the annual effective tax rate for the full fiscal year to "ordinary" income or loss did not provide a reliable estimate of the provision for income taxes because small fluctuations in estimated income resulted in significant changes in the estimated annual tax rate.

Therefore, the Company instead used a discrete effective tax rate method to

For the three months ended March 31, 2021 and 2020, the Company calculated the provision for income taxes for interim periods by applying an estimate of the annual effective tax rate for the full fiscal year to "ordinary" income or loss (pre-tax income or loss excluding unusual or infrequently occurring items) for the period.

There were no material changes to the Company's methodology for determining unrecognized tax benefits during the three months ended March 31, 2021.

The Company recorded income tax (benefit) expense at an effective tax rate of 26.1 % and ( 24.4 )% for the three months ended March 31, 2021 and 2020, respectively.

The Company's effective tax rate for the three months ended March 31, 2021 was higher compared to the U.S.

federal statutory rate due primarily to state taxes, including valuation allowances limiting certain state tax benefits, partially offset by tax expense relating to deduction limitations for executive compensation.

The Company's effective tax rate for the three months ended March 31, 2020 was lower than the U.S.

federal statutory rate due primarily to valuation allowances provided against federal and state deferred tax assets for the additional unrealized losses on the Company's investment in Equitrans Midstream incurred in the first quarter of 2020 that, if such investment is sold, would become capital losses.

The Company believes it is more likely than not that such additional unrealized losses will not be realized for tax purposes.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

calculate taxes for the nine months ended September 30, 2019.

There were no material changes to the Company's methodology for determining unrecognized tax benefits during the nine months ended September 30, 2020.

The Company recorded income tax benefit at an effective tax rate of 22.3 % and 17.1 % for the nine months ended September 30, 2020 and 2019, respectively.

The Company's effective tax rate for the nine months ended September 30, 2020 was higher compared to the U.S.

federal statutory rate due primarily to state taxes, including valuation allowances that limit certain state tax benefits, and the benefit related to the settlement of the Company's 2010, 2011 and 2012 audit with the Internal Revenue Service (IRS).

These items were partly offset by valuation allowances provided against federal and state deferred tax assets for the additional unrealized losses on the Company's investment in Equitrans Midstream incurred through September 30, 2020 that, if such investment is sold, would become capital losses.

The Company believes it is more likely than not that such additional unrealized losses will not be realized for tax purposes.

The Company's effective tax rate for the nine months ended September 30, 2019 was lower compared to the U.S.

federal statutory rate due primarily to state valuation allowances that limit certain state tax benefits as well as the Company's recognition of executive compensation and transaction costs, which are not deductible for tax purposes, partly offset by state taxes recorded in 2019 and the Company's reversal of its valuation allowances related to state net operating losses utilization against future taxable income and Alternative Minimum Tax (AMT) refund sequestration.

The Company's reversal of its AMT refund valuation allowance resulted from a first quarter 2019 IRS announcement that reversed the IRS's prior position that 6.2 % of AMT refunds are subject to sequestration by the U.S.

federal government.

On March 27, 2020, the U.S.

Congress enacted the Coronavirus Aid, Relief and Economic Security Act (the CARES Act).

The CARES Act accelerated the Company's ability to claim federal refunds of AMT credits, increasing the Company's expected collectable refund in 2020 by $ 94.8 million to $ 379.3 million, all of which, plus interest of $ 12.1 million, was received during the nine months ended September 30, 2020.

The CARES Act also increased the interest expense limitation from 30% to 50% of adjusted taxable income (ATI) and provides the Company the option to use its 2019 ATI in 2020.

Further, the CARES Act modified certain net operating loss (NOL) rules, including allowing five year carrybacks for NOLs arising in 2018, 2019 and 2020 and temporarily removing the 80% taxable income NOL utilization limit for those periods.

The Company does not expect any other tax-related provisions of the CARES Act to have a material impact on its financial statements and related disclosures.

On April 13, 2021, West Virginia enacted corporate income tax legislation that primarily impacts the way that taxable income is apportioned to West Virginia for tax years beginning on or after January 1, 2022.

The Company is evaluating the impact of this change in law on the consolidated financial statements.

Credit facility .

The Company has a $ 2.5 billion credit facility that expires in July 2022.

The Company had $ 0.8 billion of letters of credit outstanding under its credit facility as of September 30, 2020 and no letters of credit outstanding under its credit facility as of December 31, 2019.

Under the Company's credit facility, for the three months ended September 30, 2020 and 2019, the maximum amounts of outstanding borrowings were $ 399 million and $ 319 million, respectively, the average daily balances were approximately $ 149 million and $ 105 million, respectively, and interest was incurred at weighted average annual interest rates of 2.2 % and 3.6 %, respectively.

Under the Company's credit facility, for the nine months ended September 30, 2020 and 2019, the maximum amounts of outstanding borrowings were $ 399 million and $ 1,108 million, respectively, the average daily balances were approximately $ 90 million and $ 340 million, respectively, and interest was incurred at weighted average annual interest rates of 2.5 % and 4.0 %, respectively.

Based on the Company's senior notes credit rating as of September 30, 2020, the margin on base rate loans under the Company's credit facility was 1.00 % and the margin on Eurodollar rate loans was 2.00 %.

The Company has a $ 2.5 billion credit facility.

On April 23, 2021, the Company entered into an Extension Agreement and First Amendment to Second Amended and Restated Credit Agreement (the Extension Agreement and First Amendment), amending the Second Amended and Restated Credit Agreement, dated as of July 31, 2017, among the Company, PNC Bank, National Association, as administrative agent, swing line lender and an L/C issuer and the other lenders party thereto (the Credit Agreement).

The Extension Agreement and First Amendment, among other things, (i) extends the maturity date of the commitments and loans under the Credit Agreement from July 31, 2022 to July 31, 2023, (ii) adds customary provisions to provide for the eventual replacement of LIBOR as a benchmark interest rate and (iii) adds an additional pricing level for the Applicable Rate (as defined in the Credit Agreement).

The Company had approximately $ 770 million and $ 791 million of letters of credit outstanding under its credit facility as of March 31, 2021 and December 31, 2020, respectively.

Under the Company's credit facility, for the three months ended March 31, 2021 and 2020, the maximum amounts of outstanding borrowings were $ 890 million and $ 356 million, respectively, the average daily balances were approximately $ 525 million and $ 86 million, respectively, and interest was incurred at weighted average annual interest rates of 2.1 % and 3.2 %, respectively.

Term loan facility.

The Company had a $ 1.0 billion term loan facility that was scheduled to mature in May 2021.

During the second quarter 2020, the Company used proceeds from the offering of its Convertible Notes (see below), income tax refunds received during the quarter (see Note 5) and proceeds from the 2020 Divestiture (see Note 10) to fully repay its term loan facility on June 30, 2020.

Under the Company's term loan facility, from January 1, 2020 through June 30, 2020, the average daily balance was approximately $ 692 million and interest was incurred at a weighted average annual interest rate of 2.6 %.

As of September 30, 2019, the Company had $ 1.0 billion of outstanding borrowings under its term loan facility.

For the period May 31, 2019 through September 30, 2019, interest was incurred on the Company's term loan facility borrowings at a weighted average annual interest rate of 3.3 %.

Adjustable Rate Notes.

On January 21, 2020, the Company issued $ 1.0 billion aggregate principal amount of 6.125 % senior notes due February 1, 2025 and $ 750 million aggregate principal amount of 7.000 % senior notes due February 1, 2030 (together, the Adjustable Rate Notes).

The Company used the net proceeds from the Adjustable Rate Notes to repay $ 500 million aggregate

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

principal amount of the Company's floating rate notes, $ 500 million aggregate principal amount of the Company's 2.50 % senior notes, $ 500 million aggregate principal amount of the Company's 4.875 % senior notes and $ 200 million of the Company's term loan facility borrowings.

The Company fully redeemed its floating rate notes and 2.50 % senior notes at a price of 100 % and 100.446 % (inclusive of a make whole call premium), respectively, of each note's principal amount plus accrued but unpaid interest of $ 1.2 million and $ 4.2 million, respectively.

This resulted in the payment of make whole call premiums of $ 2.2 million related to the Company's 2.50 % senior notes.

The $ 500 million aggregate principal amount of the Company's 4.875 % senior notes was redeemed at a total cost of $ 517.4 million, inclusive of a tender premium of $ 10.0 million and accrued but unpaid interest of $ 7.4 million.

As a result of downgrades of the Company's senior notes credit rating that occurred subsequent to the issuance of the Adjustable Rate Notes, the interest rate on the 6.125 % senior notes increased to 7.875 % and the interest rate on the 7.000 % senior notes increased to 8.750 % beginning with the interest payment period that started on August 1, 2020.

The adjusted interest rate under the Adjustable Rate Notes cannot exceed 2 % of the original interest rate first set forth on the face of the senior notes.

During the second quarter 2020, the Company used proceeds from the offering of its Convertible Notes (see below), income tax refunds received by the Company and proceeds from the 2020 Divestiture (see Note 9) to fully repay its term loan facility on June 30, 2020.

Under the Company's term loan facility, from January 1, 2020 through March 31, 2020, the average daily balance was approximately $ 949 million and interest was incurred at a weighted average annual interest rate of 2.8 %.

4.875 % Senior Notes .

In April 2020, the Company repurchased $ 4.6 million aggregate principal amount of its 4.875 % senior notes pursuant to open market purchases.

In August 2020, the Company repurchased $ 101.5 million aggregate principal amount of the Company's 4.875 % senior notes at a total cost of $ 105.9 million, inclusive of a tender premium of $ 3.3 million and accrued but unpaid interest of $ 1.1 million.

On February 1, 2021, the Company redeemed the remaining $ 125.1 million aggregate principal amount of the Company's 4.875 % senior notes at a total cost of $ 130.7 million, inclusive of redemption premiums of $ 4.3 million and accrued but unpaid interest of $ 1.3 million.

Convertible Notes .

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After deducting offering costs of $ 16.9 million and Capped Call Transactions (defined and described below) costs of $ 32.5 million, the net proceeds from the offering of $ 450.6 million were used to repay $ 450 million of the Company's term loan facility borrowings as well as for general corporate purposes.

Interest under the Convertible Notes is payable semiannually in arrears on May 1 and November 1 of each year beginning on November 1, 2020.

Holders of the Convertible Notes may convert their Convertible Notes, at their option, at any time prior to the close of business on January 30, 2026 under the following circumstances:

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On or after February 1, 2026, holders of the Convertible Notes may convert their Convertible Notes, at their option, at any time until the close of business on the second scheduled trading date immediately preceding May 1, 2026.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Upon conversion of the Convertible Notes, the Company intends to use a combined settlement approach to satisfy its obligation by paying or delivering to holders of the Convertible Notes cash equal to the principal amount of the obligation and EQT common stock for amounts that exceed the principal amount of the obligation.

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A sinking fund is not provided for the Convertible Notes.

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The initial conversion rate for the Convertible Notes is 66.6667 shares of EQT common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of $ 15.00 per share of EQT common stock.

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The cost to purchase the Capped Call Transactions were recorded as a reduction to equity and will not be remeasured.

For the nine months ended September 30, 2020, the Convertible Notes had a net shareholders' equity impact of $ 63.6 million, which consisted of the conversion option equity component of $ 100.9 million less the Capped Call Transactions costs of $ 32.5 million and issuance costs attributable to the equity component of $ 4.8 million.

As of September 30, 2020, the net carrying amount of the Convertible Notes liability component consisted of principal of $ 500 million less the unamortized debt discount of $ 134.0 million and unamortized issuance costs of $ 11.6 million.

During the second quarter of 2020, the Convertible Notes had a net shareholders' equity impact of $ 63.6 million, which consisted of the conversion option equity component of $ 100.9 million less the Capped Call Transactions costs of $ 32.5 million and issuance costs attributable to the equity component of $ 4.8 million.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The table below summarizes the net carrying amount of the Convertible Notes, including the unamortized debt discount and debt issuance costs.

March 31, 2021 December 31, 2020

Principal $ 500,000 $ 500,000

unamortized debt discount 124,151 129,103

unamortized debt issuance costs 10,920 11,263

Net carrying value of Convertible Notes $ 364,929 $ 359,634

The table below summarizes the components of interest expense related to the Convertible Notes.

Three Months Ended

September 30, 2020 Nine Months Ended

September 30, 2020

March 31, 2021

Contractual interest expense $ 2,188

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Total Convertible Notes interest expense $ 7,483

Surety Bonds .

During the nine months ended September 30, 2020, the Company issued approximately $ 93 million in surety bonds in response to its credit downgrades by Moody's, S&P and Fitch.

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Based on the closing stock price of EQT common stock of $ 18.58 on March 31, 2021, the if-converted value of the Convertible Notes exceeded the principal amount by $ 119 million.

The Convertible Notes were not convertible at March 31, 2021.

Earnings Per Share

In periods when the Company reports a net loss, all options, restricted stock, performance awards and stock appreciation rights are excluded from the calculation of diluted weighted average shares outstanding because of their anti-dilutive effect on loss per share.

As a result, for the three and nine months ended September 30, 2020, all securities, totaling 6,671,532 and 6,715,083 , respectively, were excluded from potentially dilutive securities because of their anti-dilutive effect on EPS.

Likewise, for the three and nine months ended September 30, 2019, all securities, totaling 2,998,033 and 3,070,567 , respectively, were excluded from potentially dilutive securities because of their anti-dilutive effect on EPS.

As a result, for the three months ended March 31, 2021 and 2020, all securities, totaling 7,745,522 and 6,753,915 , respectively, were excluded from potentially dilutive securities because of their anti-dilutive effect on EPS.

As discussed in Note 6, the Company issued the Convertible Notes during the second quarter of 2020 and, upon conversion of the Convertible Notes, intends to use a combined settlement approach to satisfy its obligation under the Convertible Notes.

As such, there is no adjustment to the diluted EPS numerator for the cash-settled portion of the instrument.

In addition, for the three and nine months ended September 30, 2020, the conversion premium of 6,666,670 shares was excluded from potentially dilutive securities because of its anti-dilutive effect on EPS.

Changes in Accumulated OCI (Loss) by Component

The following table summarizes the changes in accumulated OCI (loss) by component.

Interest rate cash

flow hedges, net of tax Other postretirement

benefits liability adjustment,

net of tax Accumulated OCI (loss),

July 1, 2019 $ ( 303 ) $ ( 5,363 ) $ ( 5,666 )

Losses reclassified from accumulated OCI, net of tax 43 (a) 77 (b) 120

September 30, 2019 $ ( 260 ) $ ( 5,286 ) $ ( 5,546 )

July 1, 2020 $ — $ ( 5,115 ) $ ( 5,115 )

Losses reclassified from accumulated OCI, net of tax — 72 (b)

September 30, 2020 $ — $ ( 5,043 ) $ ( 5,043 )

January 1, 2019 $ ( 387 ) $ ( 5,019 ) $ ( 5,406 )

Losses reclassified from accumulated OCI, net of tax 127 (a) 229 (b) 356

Change in accounting principle — ( 496 ) (c) ( 496 )

September 30, 2019 $ ( 260 ) $ ( 5,286 ) $ ( 5,546 )

January 1, 2020 $ — $ ( 5,199 ) $ ( 5,199 )

Losses reclassified from accumulated OCI, net of tax — 156 (b)

September 30, 2020 $ — $ ( 5,043 ) $ ( 5,043 )

(a) Losses, net of tax, related to interest rate cash flow hedges were reclassified from accumulated OCI into interest expense.

(b) Losses, net of tax, related to other postretirement benefits liability adjustments are attributable to net actuarial losses and net prior service costs.

In addition, for the three months ended March 31, 2021, the conversion premium of 6,666,670 shares was excluded from potentially dilutive securities because of its anti-dilutive effect on EPS.

Equitrans Share Exchange

On February 26, 2020, the Company entered into two share purchase agreements (the Share Purchase Agreements) with Equitrans Midstream, pursuant to which, among other things, the Company sold to Equitrans Midstream a total of 25,299,752 shares, or 50 % of its ownership, of Equitrans Midstream's common stock in exchange for approximately $ 52 million in cash and rate relief under certain of the Company's gathering contracts with EQM, an affiliate of Equitrans Midstream (the Equitrans Share Exchange).

The transactions contemplated by the Share Purchase Agreements closed on March 5, 2020 (the Share Purchase

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Closing Date).

On February 26, 2020, the Company entered into two share purchase agreements (the Share Purchase Agreements) with Equitrans Midstream, pursuant to which, among other things, the Company sold to Equitrans Midstream a total of 25,299,752 shares of Equitrans Midstream's common stock in exchange for approximately $ 52 million in cash and rate relief under certain of the Company's gathering contracts with EQM, an affiliate of Equitrans Midstream (the Equitrans Share Exchange).

The transactions contemplated by the Share Purchase Agreements closed on March 5, 2020 (the Share Purchase Closing Date).

The rate relief was effected through the execution of the Consolidated GGA (defined herein).

As of September 30, 2020, the Company owned 25,296,026 shares of Equitrans Midstream's common stock.

On February 26, 2020, the Company entered into a gas gathering and compression agreement (the Consolidated GGA) with an affiliate of EQM, pursuant to which, among other things, EQM agreed to provide to the Company gas gathering services in the Marcellus and Utica Shales of Pennsylvania and West Virginia, and the Company committed to an initial annual minimum volume commitment of 3.0 Bcf per day and an acreage dedication in Pennsylvania and West Virginia.

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Such payments are conditioned upon the quarterly average of the NYMEX Henry Hub natural gas settlement price exceeding certain price thresholds.

In addition, the Consolidated GGA provides a cash payment option that grants the Company the right to receive payments from EQM in the event that the MVP in-service date has not occurred prior to January 1, 2022.

In addition, the Consolidated GGA

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

provides a cash payment option that grants the Company the right to receive payments from EQM in the event that the MVP in-service date has not occurred prior to January 1, 2022.

On the Share Purchase Closing Date, the Company recorded in the Condensed Consolidated Balance Sheet a contract asset representing the estimated fair value of the rate relief provided by the Consolidated GGA of $ 410 million, a derivative liability related to the Henry Hub Cash Bonus of approximately $ 117 million and a decrease in the Company's investment in Equitrans Midstream of approximately $ 158 million.

The resulting gain of approximately $ 187 million was recorded in the Statement of Condensed Consolidated Operations.

Beginning in the first quarter of 2021, the Company will recognize amortization of the contract asset over a period of four years in a manner consistent with the expected timing of the Company's realization of the economic benefits of the rate relief provided by the Consolidated GGA.

As of September 30, 2020, the current portion of the contract asset was approximately $ 84 million.

As of September 30, 2020, the derivative liability related to the Henry Hub Cash Bonus was approximately $ 152 million.

The resulting gain of approximately $ 187 million was recorded in the Statement of Condensed Consolidated Operations during the first quarter of 2020.

Beginning with the MVP in-service date, the Company expects to recognize amortization of the contract asset over a period of approximately four years in a manner consistent with the expected timing of the Company's realization of the economic benefits of the rate relief provided by the Consolidated GGA.

As of March 31, 2021, the current portion of the contract asset was approximately $ 20 million.

As of March 31, 2021, the derivative liability related to the Henry Hub Cash Bonus was approximately $ 113 million.

The fair value of the contract asset was based on significant inputs that are not observable in the market and, as such, is a Level 3 fair value measurement.

Key assumptions used in the fair value calculation included an estimated production volume forecast and a market-based discount rate.

Key assumptions used in the fair value calculation included an estimated production volume forecast, a market-based discount rate and a probability-weighted estimate of the in-service date of the MVP.

The fair value of the derivative liability related to the Henry Hub Cash Bonus was based on significant inputs that were interpolated from observable market data and, as such, is a Level 2 fair value measurement.

See Note 4 for a description of the fair value hierarchy.

2020 Asset Transactions

2020 Asset Exchange Transactions and 2020 Divestiture

2020 Asset Exchange Transactions.

During the nine months ended September 30, 2020, the Company closed on various acreage trade agreements (collectively, the 2020 Asset Exchange Transactions), pursuant to which the Company exchanged approximately 14,600 aggregate net revenue interest acres across Greene, Allegheny, Westmoreland and Washington Counties, Pennsylvania;

Wetzel and Marshall Counties, West Virginia;

and Belmont County, Ohio for approximately 14,600 aggregate net revenue interest acres across Greene and Washington Counties, Pennsylvania;

Wetzel County, West Virginia;

and Belmont County, Ohio.

As a result of the 2020 Asset Exchange Transactions, the Company recognized a loss of $ 11.6 million and $ 67.2 million in loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations during the three and nine months ended September 30, 2020, respectively.

During the third quarter of 2019, the Company closed on an acreage trade agreement and purchase and sale agreement with a third party (the 2019 Asset Exchange Transaction), pursuant to which the Company exchanged approximately 16,000 net revenue interest acres primarily in Wetzel and Marion Counties, West Virginia.

Under the terms of the purchase and sale agreement, the Company assigned to the third party a gas gathering agreement that covers a portion of Tyler County, West Virginia and provides a firm gathering commitment, and the Company was released from its remaining obligations under that gas gathering agreement.

As consideration for the third party's assumption of the Tyler County gas gathering agreement, the Company agreed to reimburse the third party for certain firm gathering costs under the gas gathering agreement through December 2022 and assign the third party an additional approximately 3,000 net revenue interest acres in Tyler and Wetzel Counties, West Virginia.

As a result of the 2019 Asset Exchange Transaction, the Company recognized a net loss of $ 13.9 million in loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations during the three months ended September 30, 2019.

As of September 30, 2020 and December 31, 2019, the liability for the reimbursement of those certain firm gathering costs was $ 28.7 million and $ 36.8 million and was recorded in other current and noncurrent liabilities in the Condensed Consolidated Balance Sheets.

EQT Corporation and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The fair value of leases acquired and, for the 2019 Asset Exchange Transaction, the fair value of the liability for the reimbursement of certain firm gathering costs were based on inputs that are not observable in the market and, as such, are a Level 3 fair value measurement.

During the first quarter of 2020, the Company closed on various acreage trade agreements (collectively, the 2020 Asset Exchange Transactions), pursuant to which the Company exchanged approximately 5,000 aggregate net revenue interest acres for approximately 5,000 aggregate net revenue interest acres, all of which are located primarily in Greene County, Pennsylvania.

As a result of the 2020 Asset Exchange Transactions, the Company recognized a loss of $ 48.9 million in (gain) loss on sale/exchange of long-lived assets in the Statement of Condensed Consolidated Operations for the three months ended March 31, 2020.

The fair value of leases acquired were based on inputs that are not observable in the market and, as such, is a Level 3 fair value measurement.

See Note 4 for a description of the fair value hierarchy.

Key assumptions used in the fair value calculations included market-based prices for comparable acreage and the net present value of expected payments due for reimbursement.

Key assumptions used in the fair value calculation included market-based prices for comparable acreage.

2020 Divestiture.

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The Contingent Consideration represents an embedded derivative that is recorded at fair value in the Consolidated Balance Sheets.

The Contingent Consideration had no fair value as of May 11, 2020 and June 30, 2020 and a fair value of $ 5.1 million as of September 30, 2020.

Changes in fair value are recorded in loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations.

The Contingent Consideration had a fair value of $ 3.1 million and $ 1.9 million as of March 31, 2021 and December 31, 2020, respectively.

Changes in fair value are recorded in (gain) loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations.

The fair value of the Contingent Consideration is based on significant inputs that are interpolated from observable market data and, as such, is a Level 2 fair value measurement.

See Note 4 for a description of the fair value hierarchy.

As a result of the 2020 Divestiture, the Company recognized a net loss of $ 36.8 million, including the impact of the change in fair value of the Contingent Consideration, in loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations during the nine months ended September 30, 2020.

Share-based Compensation Plans

Effective in 2020, the Management Development and Compensation Committee of the Company's Board of Directors (the Compensation Committee) adopted the 2020 Incentive Performance Share Unit Program (the 2020 Incentive PSU Program) under the 2019 Long-Term Incentive Plan.

The 2020 Incentive PSU Program was established to provide long-term incentive opportunities to key employees to further align their interests with the interests of shareholders and customers and the strategic objectives of the Company.

The Company granted 1,376,198 units under the 2020 Incentive PSU Program during the first quarter of 2020.

The units will vest following a three-year performance period and will be settled in EQT common stock.

The payout factor will vary between zero and 150 % of the number of outstanding units contingent upon the performance of adjusted well costs, adjusted free cash flow and total shareholder return relative to a predefined peer group, in each case, over the performance period.

Effective January 13, 2020, the Compensation Committee granted 1,240,000 non-qualified stock appreciation rights exercisable in EQT common stock, cash or a combination thereof based on the excess of the fair market value of a share of EQT common stock as of the date of exercise over a base price of $ 10.00 .

The stock appreciation rights are subject to service and performance conditions.

Effective February 27, 2020, the Compensation Committee granted 1,000,000 non-qualified stock options to the President and Chief Executive Officer of the Company.

The 2020 options expire on the seventh anniversary of the grant date, have an exercise price of $ 10.00 and vest in three equal annual installments beginning on the first anniversary of the grant date.

Effective in 2020, the Compensation Committee granted 1,734,740 restricted stock equity awards.

The restricted stock equity awards vest in three equal annual installments beginning on the first anniversary of the grant date, assuming continued employment with the Company by the award recipient.

EQT CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Subsequent Events

On May 5, 2021, the Company, through one of its wholly owned subsidiaries, entered into a membership interest purchase agreement (the Alta Purchase Agreement) with Alta Resources Development, LLC, a Delaware limited liability company (Alta), Alta Marcellus Development, LLC, a Delaware limited liability company (Alta Marcellus) and ARD Operating, LLC, a Delaware limited liability company (ARD), pursuant to which the Company agreed to acquire all of the issued and outstanding equity interests of Alta Marcellus and ARD, which collectively hold all of Alta’s upstream and midstream assets (the Alta Acquisition).

Pursuant to the terms of the Alta Purchase Agreement, the consideration to be paid by the Company for the Alta Acquisition consists of $ 1.0 billion in cash and 105,306,346 shares of EQT common stock (the Equity Consideration), subject to certain purchase price adjustments to be calculated as of the closing date (with all post effective date purchase price adjustments netted against the Equity Consideration).

The Alta Purchase Agreement contains customary representations and warranties, covenants, indemnification and termination provisions and has an effective date of January 1, 2021.

EQT CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements